3.2 Dwelling Coverages A-E and Other Coverages
Key Takeaways
- Coverage A Dwelling, B Other Structures, C Personal Property, D Fair Rental Value, and E Additional Living Expense are the five core dwelling coverages.
- Coverage B (Other Structures) carries an automatic limit of 10% of Coverage A as an additional amount of insurance on the DP-2/DP-3.
- On rental risks Coverage D (Fair Rental Value) responds to lost rent; on owner-occupied risks Coverage E (Additional Living Expense) responds to extra costs of living elsewhere.
- DP-2 and DP-3 use an 80% replacement-cost coinsurance clause; falling below 80% triggers a proportional penalty on partial losses.
- Other Coverages include debris removal, reasonable repairs, trees/shrubs/plants, and improvements made by a tenant on the rented premises.
The Five Core Coverages
The dwelling forms organize property exposures into five lettered coverages:
| Coverage | Insures | Default / Notes |
|---|---|---|
| A — Dwelling | The residence structure + attached structures and building materials on site | Chosen by insured; basis for percentage limits |
| B — Other Structures | Detached garages, sheds, fences | Additional 10% of Coverage A (DP-2/DP-3) |
| C — Personal Property | Household contents usual to a dwelling | Optional; off-premises sublimit applies |
| D — Fair Rental Value | Lost rental income when the unit is untenantable | 20% of Coverage A on DP-2/DP-3 |
| E — Additional Living Expense | Extra living costs for owner-occupant | Shares the 20% loss-of-use limit (D+E combined on DP-2/DP-3) |
A key distinction: on a tenant-occupied (rental) dwelling, the loss-of-use exposure is Coverage D Fair Rental Value. On an owner-occupied dwelling, it is Coverage E Additional Living Expense. The same loss-of-use percentage limit is shared between them, so the two coverages do not stack to separate amounts.
Coverage A is the anchor of the entire policy. The insured chooses the Coverage A limit, and every percentage-based limit — Other Structures, loss of use, trees and shrubs — keys off that number. Get Coverage A wrong and every downstream limit is wrong too. Coverage A insures the dwelling on the described location, structures attached to it, materials and supplies on or next to the premises used to build or repair it, and building equipment and outdoor fixtures.
Loss-of-Use Percentages by Form
The internal limits for Coverages B, C, D, and E differ by form. Memorize the DP-1 versus DP-2/DP-3 split:
- DP-1: Coverage B = 10% of A but it is part of (not additional to) Coverage A; combined Coverage D + E loss of use = 10% of Coverage A, and only Fair Rental Value (D) is automatically included — ALE is not provided unless the contents are also insured.
- DP-2 / DP-3: Coverage B = additional 10% of Coverage A; combined Coverage D + E = 20% of Coverage A.
The word additional is decisive on the exam. On a DP-3, a $300,000 dwelling automatically carries up to $30,000 of Other Structures coverage on top of the $300,000 — not carved out of it.
Coverage C personal property is optional on the dwelling forms because many DP risks are rentals where the owner has no contents to insure. When Coverage C is purchased, it covers household contents usual to a dwelling and follows the form's peril set. Off-premises personal property is subject to a sublimit (commonly 10% of the Coverage C limit), and certain property classes such as money, securities, and business property are limited or excluded just as on a homeowners form.
Worked Coinsurance Example
DP-2 and DP-3 apply an 80% replacement-cost coinsurance clause to partial losses. The formula is:
Payment = (Limit Carried ÷ Limit Required) × Loss − Deductible, capped at the policy limit and never more than the actual loss.
Assume a dwelling with $400,000 replacement cost. The 80% requirement is $320,000. The owner insured it for only $240,000 and has a $1,000 deductible. A covered partial loss is $60,000.
- Limit required (80%): $400,000 × 0.80 = $320,000
- Coinsurance ratio: $240,000 ÷ $320,000 = 0.75
- Indemnity before deductible: 0.75 × $60,000 = $45,000
- Less deductible: $45,000 − $1,000 = $44,000 paid
The $15,000 shortfall is the coinsurance penalty the insured absorbs for underinsuring. Had the owner carried at least $320,000, the loss would be paid in full on a replacement-cost basis less the deductible.
Other Coverages
Beyond the five lettered coverages, the forms add several Other Coverages that pay in addition to the policy limit unless stated otherwise:
- Debris removal — clears debris of covered property after a covered loss; may share or extend the limit.
- Reasonable repairs — pays to protect property from further damage after a loss.
- Property removed — covers property moved to protect it from a covered peril, for up to 5 days (DP) at any location.
- Trees, shrubs, plants — limited to 5% of Coverage A, with a per-item cap, only for named perils (not wind on the DP-1).
- Improvements and betterments / tenant's improvements — protects fixtures a tenant adds at their own expense.
- Fire department service charge — a small additional limit for the fire department's response.
A DP-3 insures a dwelling for $250,000 of Coverage A. With no separate Coverage B amount shown, how much Other Structures protection applies?
A rental dwelling is made untenantable by a covered fire. Which coverage pays the owner for the rent that is no longer collected?
Reading the Coverage Relationships and Loss of Use
In the dwelling program the additional coverages are usually expressed as percentages of Coverage A, so deriving them is a frequent calculation. Coverage B (Other Structures) is commonly 10% of Coverage A as additional insurance; Coverage C (Personal Property), when purchased, is set as a flat limit. Off-premises personal property is typically limited to 10% of Coverage C.
Fair Rental Value (D) reimburses the rent the landlord loses while the dwelling is untenantable, and Additional Living Expense (E) pays the extra cost an owner-occupant incurs to maintain a normal standard of living elsewhere — both only for the time reasonably required to repair or replace, not a fixed calendar period.
Worked derivation: If Coverage A is $200,000 and Coverage B is 10%, Other Structures provides $20,000 of additional coverage. If Coverage C is $100,000, off-premises property is capped at $10,000 (10% of C). Distinguishing additional limits (added on top of A) from internal sublimits (carved out of a limit) is the exam's favorite twist here.